Diabetes and Alzheimer's disease share pathologic links toward cognitive deficits. Pharmacologic agonist of the nuclear receptor, peroxisomal proliferator-activating receptor gamma (PPARγ), that is, rosiglitazone (rosi), are insulin sensitizing agents that improve memory in Alzheimer's disease. However, direct molecular signaling targets that improve memory by PPARγ in the hippocampus have not been investigated. We compared outcomes from oral versus intracerebroventricular (ICV) administration of rosi on memory and changes in synaptic plasticity in type 2 diabetic (db/db) mice. Db/db mice treated with rosi (ICV) showed significant improvement in memory, long-term potentiation, and post-tetanic potentiation but did not improve peripheral insulin sensitivity. Gene and protein analysis revealed increased brain-derived neurotrophic factor (BDNF) in db/db mice treated with rosi (ICV). Transcriptional activation of exon IX as determined by luciferase assays confirmed PPARγ regulation of BDNF promoter activity. Transient transfection of constitutively active PPARγ plasmid in hippocampal neuronal cells induced increased BDNF, AMPA, and NMDA receptors expression and spine formation. Findings from the present study implicate a novel PPARγ-BDNF molecular signaling mechanism as a potential therapeutic target for cognitive impairment.